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Pepsi’s Profits Are Way Up So Far This Year and There’s a ‘Simple’ Reason Why

PepsiCo expected to report an increase in earningsPepsiCo expected to report an increase in earnings
PepsiCo reports increased profits through the second quarter this year fueled by new drinks and 'Simply' snacks. (?? Richard B. Levine) (Photo by Richard Levine/Corbis via Getty Images)Richard Levine — Corbis via Getty Images

PepsiCo (PEP) reported a better-than-expected profit for the second quarter, helped by lower raw material costs as well as strong demand for Frito-Lay snacks and new beverages in North America.

PepsiCo’s shares rose 2.2 percent in premarket trading after the maker of Pepsi, Gatorade and Tropicana also raised its adjusted profit forecast for the year.

New drinks such as Propel flavored water and Naked Cold Pressed juice, and snacks under its “Simply” brand helped drive sales, the company said.

PepsiCo’s cost of sales fell 6% in the three months ended June 11.

That helped net income attributable to PepsiCo increase 1.3 percent to $2.01 billion, or $1.38 per share.

Excluding items, the company earned $1.35 per share, beating the average analyst estimate of $1.30, according to Thomson Reuters I/B/E/S.

Net revenue fell 3.3 percent to $15.395 billion, but inched past the average analyst estimate of $15.37 billion.

Net revenue in the North America Beverages unit, PepsiCo’s biggest business, rose 1 percent – the slowest growth since the company started breaking out beverage sales from the region a year ago.

Revenue from the Frito-Lay business, which includes Doritos, Lay’s and the Simply line of snacks, rose 3 percent. New snacks launched under the Simply brand included Simply Tostitos black bean chips and organic chunky medium salsa.

PepsiCo said it now expects 2016 adjusted earnings of $4.71 per share, up from its previous forecast of $4.66 per share.